Universität zu Köln

Wicknig, Florian ORCID: 0000-0002-3506-6240 (2022). Essays in Monetary and Financial Economics. PhD thesis, Universität zu Köln.

Preview

PDF Wicknig_2022.pdf Download (4MB) | Preview

Abstract

This thesis consists of four chapters that contribute to the fields of monetary and financial economics. The second chapter is based on joint work with Lucas Radke and studies the interaction between monetary policy and expectations when individuals’ expectations depend on their lifetime experiences. Since expectations differ across age-groups, the demographic structure is a relevant determinant for aggregate expectations. We show that monetary policy’s influence on inflation via expectations is impaired if the heterogeneity in expectations is part of the model. Key to this result is that agents’ limited experience leads them to expect a less persistent impact of monetary policy. In younger societies, that consist of less experienced agents, this effect is more pronounced and monetary policy is less powerful in line with empirical evidence. A demographic shift towards an older economy affects aggregate expectations such that inflation volatility rises. However, the monetary policy trade-off between output and inflation stabilization attenuates. The third chapter is based on joint work with Matthias Kaldorf and investigates the impact of central bank collateral frameworks on the firm-side. When debt of non-financial firms allows banks to obtain liquidity from the central bank, a premium is paid on these assets. As a first contribution we show that heterogeneity with respect to firm profitability shapes how firms’ debt choice reacts to this premium. Moreover, firm reactions feed back on the supply and riskiness of collateral following collateral easing. As a second contribution, we illustrate this mechanism in a more elaborated model of firms. Firm responses substantially dampen the increase in collateral supply after a collateral easing. Key to this result is increased firm risk-taking that lowers the value of collateral. We show how a covenant, that conditions eligibility on current leverage, ameliorates this dampening effect. The fourth chapter is based on joint work with Francesco Giovanardi, Matthias Kaldorf, and Lucas Radke. It builds on the analysis of Chapter 3 to investigate the preferential treatment of green bonds in central bank collateral frameworks. We show that although preferential treatment has beneficial effects on the environment, it has significant negative side-effects in terms of higher firm risk that weakens the policy’s pass-through on sustainable investment. Preferential treatment further disturbs the original trade-off of central bank collateral policy between the vailability and riskiness of collateral. We show that a carbon tax is a more powerful tool to address the negative externality from pollution. However, such a policy is optimally accompanied by changes in the central bank collateral framework that reduce a carbon tax’s negative impact on the supply of collateral. The final chapter is based on joint work with Christoph Kaufmann and Giovanni di Iasio and investigates the liquidity regulation of investment funds. Investment funds hold insufficient liquid assets to cater to periodic household redemptions, since they fail to internalize the impact of their portfolio choice on bond prices. This lowers welfare due to resource losses and a reduction in investment fund financial intermediation. We show that a macroprudential liquidity buffer for investment funds increases welfare. However, it is associated with smaller household holdings of the liquid asset, which constitutes the main welfare downside. At its optimal level, the regulatory liquidity buffer exceeds the voluntary investment fund buffer by a factor of four. In case of an aggregate shock that induces a loss of funding for investment funds, the optimal buffer prevents an amplification of the initial funding loss that would severely reduce output and consumption.

Item Type:	Thesis (PhD thesis)
Creators:	Creators Email ORCID ORCID Put Code Wicknig, Florian florian.wicknig@gmx.de orcid.org/0000-0002-3506-6240 UNSPECIFIED
URN:	urn:nbn:de:hbz:38-622097
Date:	2022
Language:	English
Faculty:	Faculty of Management, Economy and Social Sciences
Divisions:	Weitere Institute, Arbeits- und Forschungsgruppen > Center for Macroeconomic Research (CMR)
Subjects:	Economics
Uncontrolled Keywords:	Keywords Language Monetary Policy English Central Banks English Collateral English Macroprudential Regulation English Green Bonds English Expectation Formation English
Date of oral exam:	17 June 2022
Referee:	Name Academic Title Schabert, Andreas Univ.-Prof. Dr. Krause, Michael Univ.-Prof. Ph.D.
Refereed:	Yes
URI:	http://kups.ub.uni-koeln.de/id/eprint/62209